Spotify Exec Says Podcasts Are a 'Game Changer' as It Seeks Growth Opportunities

January 10, 2019

By Carlo Versano

For Spotify ー which now counts 200 million monthly active users ー the key to becoming the most dominant streaming service on the planet and achieve profitability may lie with the spoken word.

Dustee Jenkins, Spotify's ($SPOT) global head of communications, told Cheddar's Hope King that she came to CES this year to "put a stake in the ground" for podcasting. Podcasts have long been available on the platform, but it wasn't until late 2018 that the company put significant resources behind them ー redesigning the app to better promote the form and introducing Spotify for Podcasters, an analytical and distribution tool for creators.

As part of the strategy, Spotify is turning to a Netflix-esque (NFLX) model of content creation, signing big names like Amy Schumer (for whom it paid a reported $1 million) and, as announced at CES, the former ESPN anchor Jemele Hill for podcast exclusivity deals.

"We believe there is a future ー a significant opportunity in podcasts," Jenkins said. "It's a game-changer."

Spotify has benefited from explosive user growth but remains hamstrung by a business model that requires it to pay record companies the lion's share of its revenues. And the vast majority of music streamed by Spotify users is content owned by the major labels.

That's where podcasts come in. Still a relatively young industry, there is more flexibility as to how the format is monetized. The most successful podcasts usually advertise, while others rely on crowdfunding sites like Patreon.

But the bottom line for platforms like Spotify: podcasters don't get paid everytime someone listens.

And as Jenkins noted, podcasts bring in new users, and "people who listen to podcasts also consume more music." That means more time spent on the service, which in turn becomes more attractive to advertisers. Spotify only makes a small chunk of its revenues from advertising, and Jenkins said the service is experimenting with branded content, like a Microsoft ($MSFT) sponsorship of its popular Discovery Weekly personalized playlist.

Before the company can become profitable, it has to continue to focus on growth and content, Jenkins said.